(NAIROBI, KENYA) – The International Fund for Agricultural Development and Equity Group have launched a $200 million (KES 25.8 billion / £155.7 million) financing programme for smallholder farmers and rural businesses in East Africa. The initiative is designed to help them adapt to the effects of climate change.
The Africa Rural Climate Adaptation Finance Mechanism, known as ARCAFIM, is a 12 year private sector led programme aimed at closing the financing gap for climate adaptation in farming. It comprises $180 million (KES 23.3 billion / £140.1 million) in lending capital and $20 million (KES 2.6 billion / £15.6 million) in non financial expertise and training needed to support the investment.
According to a statement by IFAD and Equity Group, the loan capital is expected to revolve through four investment cycles, generating about $266 million (KES 34.5 billion / £207 million) in loans to micro, small and medium enterprises and smallholder farmers.
Equity Group said it would provide $90 million (KES 11.6 billion / £70 million) of the $180 million lending base from its balance sheet, alongside concessional capital from development partners.
ARCAFIM will operate in Kenya, Uganda, Tanzania and Rwanda. It aims to finance 260,000 smallholder farmers and 500 micro, small and medium enterprises.
IFAD Vice President Gérardine Mukeshimana said the programme will support tailored financial products and a climate adaptation financing taxonomy. She said participating institutions will gain the experience, systems and confidence to continue expanding adaptation finance. She said the mechanism starts in East Africa but is designed to be adapted and replicated across the continent.
The funding is convened with co financiers including the Green Climate Fund, the Finnish Ministry for Foreign Affairs and the Nordic Development Fund. It is also financed by the governments of Denmark and the European Union.
Equity Group CEO James Mwangi said the bank is committing its balance sheet alongside concessional capital to build a market where lending for climate resilience becomes ordinary banking business rather than an act of charity.
The programme will work with participating microfinance institutions and savings and credit cooperative societies to originate adaptation lending. It will also provide farmers and rural enterprises with knowledge to identify investments that can protect them from climate related risks. The investments include irrigation, water harvesting, livestock resilience, post harvest storage, renewable energy and climate resilient agro processing.